Moody's downgrades Boart Longyear

Moody's Investors Services has downgraded Boart Longyear Ltd's corporate debt rating after the company cut its full-year earnings guidance for the second time in less than two months.

Moody's Investors Services has downgraded Boart Longyear Ltd's corporate debt rating after the company cut its full-year earnings guidance for the second time in less than two months.

Boart expects its BB- debt rating from Standard & Poor's is also under review.

On puttting Boart on a negative ratings outlook and cutting its ratings across three debt categories, Moody's cited the slowdown in mining investment.

"The negative outlook reflects [Moody’s] expectation that headwinds continue to exist with respect to end markets served and that exploration and development activity in the mining industry as well as new mine development will remain subdued over the next twelve to eighteen months given the current volatility in prices and slowing global economic indicators," the ratings agency said.

Eureka Report research has explored how earnings downgrades from mining services companies are likely to continue well into the medium term.

On Monday, Boart said it would post earnings before interest, taxation, depreciation and amortisation of less than $176 million for 2012- 2013, its second downgrade since May, when it said earnings would come in at at the lower lower end of a range of $199m to $271m.

Boart's corporate family rating was cut to Ba3 from Ba2, while its probability of default rating was lowered to Ba3-PD from Ba2-PD and its senior unsecured note rating reduced from Ba2 to B1.

"The downgrade in the corporate family rating reflects a significant shift to the downside in the company’s core business evidenced by the pull-back in exploration and drilling expenditures as well as new capital investment by Boart Longyear’s principal end user market – the mining industry," Moody's said.

Moody's also noted that Boart's $450 million revolving credit facility has been changed to provide security in all material assets, which had weakened its position.

"The downgrade in the senior unsecured note rating to B1 from Ba2 reflects the weaker position of this debt instrument in the company’s capital structure," Moody's said.

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